The internet is filled with personal finance blogs. Visit any one of them (this one included) and you’ll be able to find hundreds, if not thousands of articles designed to help you save more money, get out of debt, budget, or invest better. While the vast majority of it is solid advice, it can all become overwhelming and blend together after a while.
So today I wanted to focus on the foundation of good personal finance. If there is one piece of advice you ever take away from this, or any personal finance site. Let it be this.
Spend less than you earn.
Honestly, it’s that easy. Stick to that simple principle and you’ll be way ahead of the game.
Spend less than you earn and you’ll stay out of debt. You’ll be able to have a healthy savings account. You’ll be able to have money to invest in stocks or real estate or unsecured Greek debt. Whatever your heart desires. When you consistently spend less money than you earn, the rest kind of takes care of itself.
It’s this simple, simple concept that also ties in to my favorite quote about being rich. “It’s not how much you make, it’s how much you keep.” It’s what goes through my mind every time I have the unfortunate experience of hearing someone brag about how much money they make. I don’t care if you make twice as much as I do. If you’re spending it all on a lavish apartment or wardrobe, or you’re racking up tens of thousands of dollars in credit card debt, all that extra money you earn doesn’t meant too much. Because really, you’re in a worse financial situation than I’ll ever be in.
It’s one of the biggest reasons people fall into debt. We try to “keep up with the Joneses” because we define being rich by the material goods that one possesses. Your friend from college may have a huge expensive house with a BMW 5-series parked in the driveway and a Rolex on his wrist. But if he put himself in a mountain of debt to do so, is he really someone you should envy? The fact is, most people who are actually rich live quite modestly. It’s a topic covered in a great book called
The Millionaire Next Door which examines this entire concept in-depth.
So whether you want to get control of your finances, or start to build real wealth, don’t focus on needing to have what other people have. The only thing you need to focus on is spending less money than you earn. Do this month after month, year after year, and you’ll know that you’re the one on the block that all the neighbors should be envious of.